USS flex retirement and TFLS question

bluebirdy

So I’ve had my flex retirement quote now, for moving to a 60% fte contract and taking 40% of benefits.

I’ve worked out, I think 🙃, that the RIB part would be actuarily reduced by 16% (approx 1.7%pa, given I’m asking for this from 57 and my pension age is set as 66?)

This sounds very decent to me (?) and thus increasingly looking like a bit of a no brainer.

I’ve also inputted my details in the consultation modeller (thanks for the reminder of the link on another thread @ussdave ) and it looks even better post-April 2024. If that is nearly correct as an estimate, I think I can take about £12k pa which - along with 60% salary (and topping up my IB contribution from this by 3.7%) I can still take home just a bit less (about £2-300 pcm) than I do currently.  Unless I have got my calculations horribly wrong of course 😆

I’m still a bit mentally challenged by what happens *afterwards* though. IF I were to do this and although I asked the USS people on the phone, I don’t think I really know what questions to ask properly. Eg.

1. If what remains in the RIB “tank” will be significantly reduced by the CARE assumptions if I move to 60%? I’m not clear on how the CARE bit is calculated (is it last 5 years?) and is it calculated on the absolute pay? So if I go down to 60% for eg 9 years until I’m 66, does that then hugely limit my accrual?

2. I still don’t really understand the lump sum bits. I can completely get that whatever RIB pension I’d still have in the tank waiting for me (subject to the question above?!) would then generate x3 of whatever it was.

Setting aside the IB pot for now, can I *STILL* just assume I can take the rest of that (RIB linked) LS later, and would it still be tax free?

I will still need to take out some hefty bits of lump sum at various points (to settle mortgage, sort out uni child contribution, do bits of work to house) so I’m now keen to really understand how this will work with flex retirement.

I think I’m confused about how the IB bit contributes a lump sum full stop, then the commutation/or not of that, then adding in the flex complication. If anyone knows of an idiot’s guide to pensions that I can read, that might help with this, please let me know.

PJM_62

Hi bluebirdy
If the flex#1 ,taking 40% of RIB, is 12k, youll also get 36k (3x12) as lump sum.
At that time, you can also take UPTO 3.66 x 12k as tax free lump sum from the IB (assuming you have enough in there).
Works same for each flex. Obv limited by what you have in IB pot.

Why are you going for 40% ?   Is it so that you can do two more flexes taking 20% more each time, working at least another year for each one,  then take a final 20% when you retire complely?  (40 + 20 + 20 + 20 = 100)

After mulling it over during xmas break, I'm about to apply for flex1 - reducing to 3 day week - and take 80% of benifits from the start, as i know i wont want to drop to a 2 day week before flex2 - fully retiring with the remaing 20%, probably after 1 year, maybe 2.

If you are worried about your IB 'tanking' , make sure your TRA is set to planned final retirement age, and USS will de-risk the pot by making sure its invested in low risk / bonds / cash.


 

PJM_62

@bluebirdy

I sat in on a USS webinar at end November. It was run by a company called MyWealth.
They are a free service provided by USS, so that members can get more individually targeted advice.
They did say they'd happy talk to work collegues not on the webinar.
0800 028 3200

PJM_62

PJM_62 said:

Hi bluebirdy
If the flex#1 ,taking 40% of RIB, is 12k, youll also get 36k (3x12) as lump sum.
At that time, you can also take UPTO 3.66 x 12k as tax free lump sum from the IB (assuming you have enough in there).
Works same for each flex. Obv limited by what you have in IB pot.

Why are you going for 40% ?   Is it so that you can do two more flexes taking 20% more each time, working at least another year for each one,  then take a final 20% when you retire complely?  (40 + 20 + 20 + 20 = 100)

After mulling it over during xmas break, I'm about to apply for flex1 - reducing to 3 day week - and take 80% of benifits from the start, as i know i wont want to drop to a 2 day week before flex2 - fully retiring with the remaing 20%, probably after 1 year, maybe 2.

If you are worried about your IB 'tanking' , make sure your TRA is set to planned final retirement age, and USS will de-risk the pot by making sure its invested in low risk / bonds / cash.


 

I was wrong here about being able to do 4 flexes in total.
Its actually max of 3 in total. The 3rd one being a leave and fully retire one.
So its poss to do ...
take 40% of pension, reduce hours by at least 20% and work at least a year ,
take another 40%, reduce hours by at least 20% again and work at least a year ,
then take final 20% of pension and leave.

And if you did that, when you leave you'll have 3 pension traunches paying out, have had 3 standard lump sums, and have had option for 3 IB lump sums.

For a 2 flex scenario , I cant think of a reason to not do ..
take 80% of pension, reduce hours by between 20 and 80% and work a year,
then take remaining 20% of pension and head for the sun.

While working during FR, you can obv still pay into the IB, ensuring that theres enough in the pot to take advantage of the option to do 3.66 x pension tax free lump sum withdrawl ,  which is on top of the 3 x pension TFLS you automatically get. 

bluebirdy

Thanks - useful thoughts.

I don’t know if I’m wrong in my assumptions about flex retirement but I’m assuming the RIB bit I’m not using continues to accrue as if I hadn’t retired? Or is it fixed at that point in time?

If my assumption is right, then my reasoning for the way I want to do it is that I’m not quite ready to retire fully - I like my job but I’d like to do less of it. I don’t have a lot in the IB pot and my OH doesn’t have as many years as me, so we need to keep going with pension accrual a little.

And I have some commitments I’ll need to fund - mortgage still and son going to university etc - so I’m thinking of this as a way of going part time but without losing as much cash, while still keeping over half of my pension to continue growing.

That way, I may be able to work longer if you see what I mean, rather than burn out and have to stop completely at 59 or whatever.

So I want to take a chunk of workload out big enough to make a difference (and to manage in full days rather than fractions of days).

And although I will lose a few hundred quid a month from take home this way, along with the tax/pension reductions (because I’ll be below 40% threshold and not paying for my pension from the 40% pension!) and in fact I’ve been on strike pay so much lately I won’t actually notice much difference right now! 

So the time seems right and I won’t need more than 40% allowing a bit more time for the other 60% bit to catch up.

If my assumption about that bit (remaining 60%) continuing to accrue is WRONG though, I’m going to have to have a massive rethink!

PJM_62

FR seems perfect for your scenario/needs.

Any RIB not taken at a flex will continue to grow, as you and uni will still be paying in contributions based on your days worked.
RIB that you have taken will increase with cpi.

PJM_62

Spoke to USS today about the quote that had been sent out to me re Flexible Retirement.

Was told that the formula they use to get a very close approximation of max combined TFLS (taking some IB tax free as well as standard 3x) , and no commutation , is ..  
(20 x standard pension) divided by 3. 
Also confirmed can do this at each flex  (upto 3 times).
And once fully retired anything still in IB can be taken using UFPLS withdrawls, which are 25% tax free.

bluebirdy

Thank you.

bluebirdy

Anyone willing to check some of my assumptions/maths!? I’ll be 57 if/when I do the first flex and I’m trying to fine tune to see if I can then afford to fully retire at 60, or just flex again/keep going to 65/66…

So, using generic numbers (not my actual figures) if my full DB pension at 57 was going to be eg £15k pa…

Total Max TFLS would be £100k ie. (£15k x 20)/3?

So if I was flexing and taking 40% of that in my first flex it would be £6000 pa and I could take max TFLS of up to £40k…?

But then the remaining 60% stays in the scheme and will continue to accrue, right? 

Does anyone know what that projected remaining £9k pa DB pension would look like when I’m eg 60ish and 66ish, given standard assumptions?

Eg. We’ll be moving to 1/75th accrual after April I think so another three years would give…( is this right?) as below:

1/75 (of whatever the CARE adjustment of my full time fte salary would be?) x 3 (assuming 3 more years) x 0.6 (I’m assuming I only receive partial accrual once part time - because I’d then be on a 0.6 fte contract)? 

So if - again, a fictional figure for ease! - my full fte CARE salary figure at 57 were eg £50k pa, I accrue an extra £1200pa after another 3 years:

£50k/75 x 3 = £2000
£2000 x 0.6 = £1200

So the remainder 60% of original pension of £9k, might turn into £10.2k by age 60?

And if I left the remainder portion (60%) in from 57 to 66, would it be

£50k/75 x 9 = £6000
£6000 x 0.6 = £3600

So original remaining pension of £9k might be £12600 by 66?

Presumably though there are lots of other uncertainties (revaluations? indexation? …other things?)

I also realise I have no clue how my career average bit is calculated - something to do with last 5 years?

I will also need to work out whether it is worth throwing more money into the IB bit (to compensate reduction in accrual due to pt working etc) and how much I could afford.

PJM_62

I agree with first part ..  40k max tfls .. 22k of it taken from IB.

Can the modeller not help with the projections?
If modeller can give you (non FR) figures at different ages, while factoring in cpi and pay rises and IB AVCs, the % increase in pension each year could be a good pointer ?